Canadian HR Reporter - Sample Issue

CANADIAN HR REPORTER MARCH 2019 16 EMPLOYMENT LAW In addition, a misclassified employee may have a claim for unpaid entitlements under em- ployment standards legislation, including termination pay, mini- mum wage, overtime pay and va- cation pay. Equally significant for some employers is the fact the Ministry of Labour posts the names of of- fenders on its website — public shaming that may also be very costly. e employee versus independent contractor test It is a common misconception that if a worker operates through an incorporated entity, this is suf- ficient to establish the worker is an independent contractor. is is incorrect. Furthermore, that a worker is found to be an independent con- tractor under one statute (for ex- ample, the Income Tax Act) is not determinative for the purposes of employment standards. The reason is that employ- ment standards legislation is "benefit conferring," intended to ensure every employee receives certain minimum employment standards. Employment adjudicators, therefore, apply a broad and gen- erous interpretation to the mean- ing of "employee," regardless of how the term is defined or applied in other legislation. When assessing whether a worker is an employee or inde- pendent contractor, Canadian ad- judicators ask this baseline ques- tion: "Is this worker in business for his own account?" If the answer is "yes," the worker will be considered an independent contractor. To determine whether a worker is in business for his own account, six factors are considered: • e level of control the entity has over the worker's activities. • Whether the worker provides his own equipment. • Whether the worker hires his own helpers. • e degree of financial risk taken on by the worker. • e degree of responsibility for investment and management held by the worker. • The worker's opportunity to profit in the performance of his own tasks. is is not an exhaustive list, nor is there a set formula for ap- plying these factors. e weight of each factor will depend on the specific facts of the case. When assessing "level of con- trol," common factors include: • Does the entity demand exclu- sive service or can the worker provide service to others? • Was the worker hired for a lim- ited scope project or duration? • Can the worker refuse a project? • Does the worker have the ability to subcontract the work? • Does the worker set his own hours of work? • Does the entity have the ability to discipline the worker? • Does the entity have supervi- sory responsibilities over the worker? When assessing "financial risk," common factors include: • Does the worker bear financial risk associated with providing the services? • Can the worker establish his rate of compensation? • Would the worker's compen- sation be negatively impacted if work is performed poorly or takes longer to perform than ini- tially anticipated? Transitioning from contractor to employee To reduce the risk of liability, an organization may want to transi- tion a worker's status from con- tractor to employee. is can be accomplished with proper planning and agreement among the parties (but should not be attempted without legal counsel). However, even after a transition has taken affect, if the employ- ment is terminated, an employer may still have to recognize the worker's length of service as an independent contractor for the purpose of calculating any reason- able notice entitlement. In the recent case of Cormier v. 1772887 Ontario Limited c.o.b. as St. Joseph Communications, Kelly Cormier had been "employed" with the defendant for eight years when her employment was terminated. Prior to that, she worked with St. Joseph Communications as an "independent contractor." e court concluded Cormier's economic dependence on her employer and length of tenure rendered her a "dependent con- tractor" — a type of contractor between employee and indepen- dent contractor. As such, her notice entitle- ment should be based on the total amount of time she had worked with the employer. e court went on to state it would have reached the same con- clusion even if Cormier had been an independent contractor rather than a dependent contractor: "Even if I had concluded that Ms. Cormier was an independent contractor from 1994 to 2004, it would have been wrong in prin- ciple to ignore these years of their relationship in determining the reasonable notice period. The court should take all of the cir- cumstances into account and in the immediate case, even if I had found Ms. Cormier to be an inde- pendent contractor, I would not have ignored these years of their relationship." Final thoughts With recent legislative changes and new and burgeoning case law, the liability for misclassification is greater than ever. Any organization that engages independent contractors, or is considering doing so, should carefully consider the associ- ated risks and benefits, and seek the advice of experienced legal counsel. Both lawyers at Sherrard Kuzz in Toronto, Sundeep Gokhale can be reached at sgokhale@sherrardkuzz. com or (416) 603-6246 and omas Gorsky can be reached at tgorsky@ sherrardkuzz.com or (416) 603-6241. Liability for misclassification greater than ever CONTRACTORS < pg. 5 When assessing if a worker is an employee or independent contractor, adjudicators ask: "Is this worker in business for his own account?"

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